Taiwan Is Caught in the middle of a war over Microchips

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By georgeskef

Concerned over fears about Chinese threats to Taiwan The U.S. and others have attempted to increase their share of Taiwan’s semiconductor manufacturing.

As Chinese warships practiced the blockade in Taiwan in March, they practiced the scenario that global politicians and leaders have been worried about not war, but the slowing down of the supply chains of electronic technology which make the modern world work.

The biggest trading partners of Taiwan -including China as well as Japan, China United States, Europe, and Japan are all battling for different views about Taiwan’s political future, but they all have the same desire to increase their share of Taiwan’s high-tech semiconductor industry.

Since the visit of Speaker Nancy Pelosi in early August, an array of American delegations have been able to kiss the rings of the most powerful Taiwan chips executives. There’s plenty to gain. In recent times Taiwan’s largest maker of chips, Taiwan Semiconductor Manufacturing Company also known as TSMC has committed to establishing new manufacturing facilities located in both Japan and the United States and Japan. It is Taiwan chip design company MediaTek MediaTek recently signed a partnership in a partnership with Purdue University to open a chip design center.

The calculations begin with the basic, yet unsettling real-world economy. Taiwan is the largest producer of the world’s top chips. It’s also fast growing into one of the most dangerous geopolitical flashpoints. It is feared that should there be conflict, businesses aren’t able to get the microchips that they require to build drones and cellphones, build supercomputers, cell networks, or develop new weapons.

Tech companies from both sides of the Pacific today rely on TSMC to create high-performance chips that not only render the graphics used in gaming, and provide smartphones with intelligence as well as assist missiles and analyze vast amounts of military information. This has transformed TSMC its name, which is not well-known to the general public to the general public, into a strategically important asset to both Washington as well as Beijing.

Through the drama that has surrounded the world this month, the importance of TSMC and the rest of the chip supply chain on the island has been evident. When Ms. Pelosi’s visit to Taiwan she met with the chief executive of TSMC, Mark Liu, and its famous founder, 91-year-old Morris Chang. A separate group, headed by Sen. Edward J. Markey, Democrat from Massachusetts Massachusetts, met with the company’s chief executive to talk about investment opportunities and improving supply chains for semiconductors.

The president of Taiwan, Tsai Ing-wen told the group she was seeing Taiwan’s technological prowess as a way to build up support for its democratic system. The president called economic security an important “pillar” of national security the president said Taiwan is willing to collaborate with other countries to create long-term supply chains that could last to supply what she called “democracy chips.”

Chinese state media was critical of the effort and branded Ms. Pelosi’s appearance a “photo op.” Still, as a sign of how significant Taiwan’s chips are, they didn’t do much to lash the company back.

Despite her frequent criticism of American delegations and their leaders, Mrs. Tsai, and the semiconductor industry she aims to protect, must face an uneasy balancing act. A lot of Taiwanese companies -including TSMC as well as others — rely on China to support their operations and even though they are supportive of Tsai. Tsai in standing up against Beijing’s insidious actions.

Although some in the semiconductor industry prefer to look to China and the United States for support in the event of a conflict with China they are wary of the unrealistic idea of creating modern factories within the United States, which is costly and does not have the support industries. It is no secret that Mr. Chang, the TSMC founder has repeatedly and openly stated the issue.

TSMC has opted not to discuss its geopolitics role and has acted within the narrow space that is between American as well as Chinese interests. It is currently building new manufacturing facilities in Japan and Arizona while it added capacity to its manufacturing facility within the east Chinese capital city of Nanjing. The most important thing is that the bulk of its most sophisticated production is in Taiwan which is in Taiwan, where TSMC continues to develop its top-of-the-line production facilities known as”fabs.

If you look at it this way the web of dependencies is a way to keep the peace. China’s dependence upon TSMC along with other Taiwanese chip companies deter the Communist Party from invading the island. It is the United States’ dependence on the same expertise that provides its military support to Taiwan more credibility.

Should there be a wartime conflict, the importance of Taiwan’s global chip supply also means harm to every side — as well as to the entire world’s digital infrastructure greatly amplified. For this reason, the people of Taiwan refer to TSMC” as their “sacred mountain, protector of the nation.”

China’s recent bellicosity intensified earlier in the month with the launch of missiles and fighter attacks and has gradually driven the island’s ties towards China.

“Right now, they’re moving very much toward the U.S.,” Dieter Ernst who is a senior fellow with the Center for International Governance Innovation is a specialist in the semiconductor industry stated of Taiwan’s top executives. “But from the perspective of the Taiwanese economy and most Taiwanese companies, they need to retain a link — and hopefully as close as possible a link — with China.”

Top semiconductor executives have expressed their displeasure with China following the military drills. Robert Tsao, the founder of Taiwan’s second-largest chip maker, United Microelectronics, said that he was planning to contribute 100 million dollars to the Taiwan military after the drills. Often viewed as friendly towards China the Chinese, Tsao has been viewed as friendly to China. Tsao said in an interview that the situation had changed.

“They will bring no progress, only destruction,” He said of China’s Communist Party. He also criticized the recent trend in recent years of Taiwanese semiconductor engineers deciding into Chinese firms for huge pay, claiming these engineers are “servicing the Chinese Communist Party.”

However, few people in Taiwan’s microchip industry believe that Taiwan can leave China. The majority of the supply chain for electronics continues to flow through China. In the past, the number of Chinese exports of semiconductors outstripped oil imports. In 2021, the country purchased over $430 billion of semiconductors, 36 percent of which was from Taiwan as per Chinese official media. A large portion of the money goes into products made for foreign companies which are then sold to other countries.

Despite China’s efforts to produce more chips in the domestic market -that have seen some successes, but have recently been targeted by a spate of executive detentions for corruption -the Taiwan chipmakers are taking care not to be the Chinese “enemy,” said Ray Yang the director of consulting of Taiwan’s state-owned Industrial Technology Research Institute.

“No one would look at TSMC and say ‘you are my enemy.’ I think for Taiwan’s industry, in fact, everyone still knows we are their friends, even China,” he added.

However, TSMC and Taiwan have become more aligned with American policies. Its cooperation was vital for this Trump administration’s attempts to thwart Huawei as a Chinese company that is a major player in the tech industry. TSMC was an important supplier to Huawei until the new U.S. rules put an end to the company’s involvement.

TSMC will also benefit from American chip subsidies that are tied to commitments to not further expand into China in the newly approved CHIPS and Science Act of 2022. Taiwanese government officials are open to a proposed U.S.-proposed Chip 4 alliance, that aims to connect Taiwan’s American chips’ supply chain with the supply chains from Taiwan, South Korea, and Japan and to do so at the expense of China.

Analysts debate the amount of protection China’s dependence on Taiwan provides it with. Some believe that the calculation of supply chains is not important in the context of a war decision that could cause unimaginable destruction and alter geopolitics.

“You have to worry that those interdependencies look very significant, in peacetime, to the people who are embedded in those relationships,” said Richard J. Danzig, who was Navy secretary under the presidency of Bill Clinton. “But when the momentum for war begins to develop, it tends to swamp those things.”

But, many agree that Taiwan’s position in the global supply chain is these concerns a significant factor, an idea commonly referred to as “the “silicon shield.” An invasion of Taiwan could be a sign which is mutually-assured destruction not of the entire world but of the many technological devices we use every every day.

This does provide a sense of security, as said Jason Hsu, a former Taiwan legislator and a current Fellow at Harvard Kennedy School. Harvard Kennedy School focused on technology.

“TSMC is in the eye of the storm,” the official said. “Sometimes what seems to be the most dangerous place can be the safest.”

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